Oil prices drift lower

HOUSTON: Oil prices fell around 1percent on Monday as investors weighed a potential global glut, with US-China trade tensions adding to concerns about an economic slowdown and weaker energy demand. Brent crude futures were down 57 cents, or 0.93 percent, at USD60.72 a barrel as of 11:25 a.m. EDT (1525 GMT), while US West Texas Intermediate futures fell 42 cents, or 0.73percent, to USD57.12. Both benchmarks fell more than USD1 earlier in the session.

Oil traders’ concerns have shifted from under-supply to over-supply, the futures contract structure of the global benchmark Brent showed. The six-month spread for Brent and US crude futures both show contracts for earlier loading are trading below those for later loading, a structure known as contango, which encourages traders to pay for storing oil so it can be sold at higher prices when supplies are expected to have shrunk in the future.

The Brent contango, which emerged on Thursday for the first time since a brief appearance in May, was trading at its widest since December 2023. The US crude futures contango emerged on Friday for the first time since January 2024.

“These glut fears are now descending onto the market, particularly looking forward into 2026. We will start to see floating storage pick up and inland tanks get filled,” said John Kilduff, partner with Again Capital.

“This is a real bearish narrative that we have not seen in some time,” Kilduff added. Both benchmarks declined more than 2percent last week, marking their third consecutive weekly decline, partly due to the International Energy Agency’s outlook for a growing supply glut in 2026.

Last week, the head of the World Trade Organization said she had urged the United States and China to de-escalate trade tensions, warning that a decoupling by the world’s two largest economies could reduce global economic output by 7percent over the longer term.

The two top oil consumers have recently renewed their trade war, imposing additional port fees on ships carrying cargo between them - tit-for-tat moves that could disrupt global freight flows. Uncertainty remains over what may happen with Russian oil supply, with US President Donald Trump warning again on Sunday that Washington would maintain “massive” tariffs on India unless it stopped buying Russian oil.